By Peter Galuszka
Regulation is the perpetual bug-a-boo among Baconauts, Boomergeddons and Blowhards of many ilk. Drop back to 2008 when our economy nearly crashed and the banking system all but collapsed. These folk will blame Fannie Mae and Freddie
Mac for giving out home mortgages to unqualified “under class” types.
They conveniently forget that a lot of it also had to do with the shameless lack of regulation and oversight into the hedge fund market and its mysterious Credit Default Swaps and Collateralized Debt Obligations and loaded banks up with billions in debt and no one knew why. The rocket scientists who created all of this couldn’t explain it.
So, we end up with Dodd-Frank which really doesn’t do much other than wrist-slap to the powerful financial industry that hands out tons of dough to political candidates.
Now, four years later, there’s still plenty of evidence why the money bags people need watching by people with big sticks. Consider:
- Feel ripped off when you use your credit card, although the technology freaks (who dot this Blog like summer mosquitos) insist that it is the only way to go? Visa, Mastercard and major banks have agreed to pay $6 billion to settle a long-running lawsuit that accused them of colluding to set fees. That’s an anti-trust matter. It means that retailers who allow customers to swipe cards have no choice and no “free market” when they pay fees. They tend to be stuck at about 3.75 percent, costing them about one dollar on every $100 worth of sales. Excuse me, did I say free market? That’s where you get to choose among competing vendors, unless, of course, they conspire to keep their fees at an artificially high level. Then it is not free market, it is robbery.
- While we’re muttering about those dark-skinned people not paying on their mortgages they did not deserve, consider some of the recent bank settlements. Wells Fargo, which took over the venerable but then troubled Wachovia, has announced it will pay $175 million, following SunTrust ($21 million) and Countrywide ($335 million) to make amends with African-Americans and Latinos who were ripped off when they got mortgages. In all three cases, the mortgage companies charged minority borrowers more in interest rates costing them thousands more for their mortgages. This wasn’t exactly Fannie Mae. The borrowers were all well qualified. It was out-and-out racism, something the Baconauts don’t like hearing and won’t be able to deflect.
- There’s been funny business in London over how the LIBOR (London Inter Offered Bank Rate) has been set. It’s not just a U.K., LIBOR is a very important stick of data. My second mortgage is pegged to it.
- And while we’re at it, let’s not forget that a year ago, Bank of America, which bought Countrywide and Merrill Lynch, agreed to pay $8.5 billion in investors who got screwed when they got dishonest information about the bad real estate loans they were stuck with.
Can anyone spell “F R E E M A R K E T?” How about you, Jim?
